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Brazil’s Special Tax on Motor Vehicles Will Likely Be Rescinded by Year’s End

29 September 2017

According to press reports, the Brazilian government has confirmed that the “super IPI” measure that adds 30 percentage points to the federal value-added tax (IPI) on imported light-duty and light commercial motor vehicles sold in Brazil (with the exception of motor vehicles from other Mercosur countries or Mexico) will be eliminated by the end of this year. A regulation confirming this action is expected to be published in Brazil’s official journal in September, with the measure expected to be rescinded 90 days from the date of publication of such regulation.

The IPI is levied by the federal government on finished goods (imported goods and goods produced domestically). According to the IPI regulations, finished goods are the result of an industrial process even if such a process is incomplete, partial or intermediate. The IPI is levied at the point of sale of domestic products shipped from an industrial or similar establishment. For imports, it is levied at the point of customs clearance of the finished goods and is based on the CIF value plus the import duty amount.

The “super IPI” tax is the most controversial measure of the October 2012 Inovar-Auto incentive programme, which is aimed at fostering industry competitiveness by encouraging automakers to produce more efficient, safer and technologically-advanced vehicles while investing in the domestic automotive sector. The programme also includes a provision that allows automakers to claim a discount of up to 30 percent in the IPI if they comply with certain average corporate efficiency targets and meet certain other requirements.